Introduction:
Global Direct Insurance Premium for 2018 is estimated as under-
Life: USD 2820 Billion USD 5193
Non-Life: USD 2373 Billion Billion
Reinsurance Premiums according to Reinsurance Treaty Programs of each and every Insurance Companies are the basis on which Reinsurance Premium outgo per Insurance Company per Country and per classified Advanced and Emerging Economies of countries in a zone are to be worked out. Again with Industrial Developments and Internet services with all kinds of Artificial Intelligence have made One World of all economies active-interactive and internationally connective.
Outside Reinsurance Treaty Programs, Facultative Reinsurances specific to a certain classes like CAR-EAR Risks, Industrial Property Risks, Oil-N-Energy Risks and Aviation and Space Risks are also in force.
Thus Global Reinsurances Premiums comprises of per company, per country per Emerging/Advanced Economies Reinsurances by:
- Proportional Reinsurance Treaties
- Non-Proportional Treaties
- Facultative Reinsurances both Proportional and Non-Proportional
- Reinsurance of Cyber Risks with no specific Territorial Scope of Risks and as Cyber Risk Loss Events of Hacking Data happens by the interplay of Hackers of Any Country on Data Loss- Data Breach of any client anywhere in the world.
- Alternative Reinsurance Technology Products of Financial Reinsurances and CAT Bonds by Securitizing of Risks through Risk Financing.
Interestingly, SIGMA Reports 3/2019 have shown a clear-cut way to have a fair reliable estimate of Global Reinsurance Premiums.
Normally Reinsurance requirements for Life Insurance Premiums of markets Globally remains lowest with the ratio of around 2% of Global Life Premiums and not more than 10% of Global Non-Life Premiums. Again various classes of General Insurance i.e. Non-Life Insurance have different ratios of Reinsurance requirements. Property, Engineering, Aviation and Marine have erratic ratios of Reinsurance Premium Outgo. Motor and Health segments in the last 5 years have recorded higher and higher growth rate. Agriculture has become special class to be recognized in General Insurances. In context of Indian Markets, Agriculture Premium is around 280 Billion INR, which is 15.4% of the Total Premium of 1819 Billion INR. Reinsurance Premium outgo is also around 10% of these premiums. Again Motor and Health Premiums have Reinsurance Premium outgo of around 1.5% only. Specialized clauses like Aviation and Oil and Energy Premiums have higher ratios of Reinsurance Premium outgo.
However, as Global Scenario, the Reinsurance Premium outgo remained an illusive figure to be specified.
If Motor and Health Premiums are with Maximum 1.5% outgo of Reinsurance, other classes of General Insurance will give around 20% as Reinsurance Premium Outgo. This is 20% of 40% of Global Non-Life Premium of US$ 2373 Billion i.e. US$ 190 Billion or US$ 200 Billion.
Reinsurance Premiums of Life business may be 2% of US$ 2820 Billion i.e. US$ 56 Billion and not more than US$ 60 Billion.
Reinsurance Requirements:
Reinsurance is required for creation of Automatic Underwriting Capacity on Any One Risk Liability on Total Sums Insured and also protection of Net Retentions by Excess of Loss Treaties in event of Large Risk Losses and also against Accumulations of many risks in events of Natural Catastrophe.
However, Health Insurance has no higher vertical limits for more than net retention limits of Insurance Companies according to levels of this Financial Net Worth. However, Reinsurance is required on a policy attaching basis or on Financial Year basis.
In case of Motor OD/TPL, limits are well within Net Capacity of Insurers. Hence, these are protected by Excess of Loss Treaties with 100% Net Retention of entire Portfolio of Motor OD and TPL Risks.
In case of Life Insurances, Maturity Claims ratio of entire business is generally 80% to 85% of Life Insurances. These are not needed to be reinsured.
Risks with Insured Claims in Life Insurance business comprises of 15% to 20% of entire life insurance portfolio of Risks.
Reinsurance other than maturity claims portfolio of life insurance risks needs reinsurance by large Risks XL Treaties or Fac Reinsurances. Sometimes Quota Share Treaties are created to cover against catastrophes. Generally Reinsurance is by Low Cost Covers.
Basis of Estimating Reinsurance Premium outgo for 2018:
Life Insurance Premiums for 2018 are US$ 2820 Billion.
Around 88% to 90% is Life Insurance Portfolio of Maturity Claims i.e. Life Premiums available for Investments. In this segment Reinsurance is not required.
Around 12% to 10% is Life Insurance Portfolio of Risk Premiums are estimated to be impacted by insured losses. Reinsurance Protection of this segment is around 20% of Risk Premiums out of Total Global Life Premiums US$ 300 Billion.
Overall Reinsurance Requirements thus came down to around 2% of US$ 2820 Billion.
General Insurance Premiums of US$ 2373 Billion have almost 60% comprising of Motor OD/TPL and Health when Reinsurance Requirement is slightly less than 2% of the premium of US$ 1428 Billion.For Motor & Health portfolio i.e. US$ 25 Billion.
Out of the remaining classes around 20% to 25% is Reinsurance Premium outgo which means around 18% of US$ 950 Billion i.e. US$ 170 Billion.
Thus, overall Reinsurance Premiums of Non-Life business are approximately US$ 215 Billion. We may round them off at US$ 200 Billion.
Approximate Estimated Reinsurance Premiums for 2018:
(Amount in USD Billion)
| Class | Gross Premiums | Reinsurance Premiums only | Amount |
| Life (Maturity Claims Business as Savings) | 2490 | – | – |
| Life Risk Premiums | 330 | 18% | 60 |
| A. Life Premiums | 2820 | 2.2% | 60 |
General Insurances:
| 1. Motor OD/TPL | 775 | 1.5% | 15 |
| 2. Accident | 120 | 20% | 25 |
| 3. Health | 640 | 1.5% | 10 |
| 4. Liability | 180 | 2.5% | 6 |
| 5. Credit | 22 | 18% | 5 |
| 6. Engineering | 25 | 20% | 5 |
| 7. Property | 400 | 20% | 80 |
| 8. Marine | 34 | 25% | 9 |
| 9. Agriculture | 34 | 25% | 9 |
| 10. Others | 143 | ||
| A. Total | 2373 | 8.42% | 200 |
| A+B | 5193 | 5% | 260 |
Overall Reinsurance Premium Outgo Ratio Marketwise:
| Global RI Premium is US$ 260 Billion | |
| 1.USA/Canada | 38% |
| 2. Advance & emerging Markets of Europe/Africa | 22% |
| 3.China | 8% |
| 4.Advanced Asia Pacific | 15% |
| 5.Emerging Asia excluding China | 5% |
| 6.Others | 12% |
| Total: | 100% |
Conclusions: Global Reinsurance Premiums Estimated as per SIGMA Reports provide very reliable data and this information may be very useful for Reinsurance Personnel in Afro- Asian Markets.
Authored By:
K. L. Naik
Director
Naik Consultancy & Advisors L.L.P
Mumbai
